With the entry into force in September 22, 2022 of the new Commercial Code, approved by Decree-Law no. 1/2022 of May 25 (the “New CCom”), limited liability quota companies (sociedades por quotas) are now able to issue bonds as a form of self-financing, as was already the case limited liability share companies (sociedades anónimas) before the entry into force of the New CCom.
The possibility for limited liability quota companies to be able to issue bonds is, in our opinion, an important innovation of the New CCom, as it allows these types of companies to obtain external financing without resorting to bank loans which are normally financially costly for the companies, provided that they adopt a corporate structure that allows greater management control. In fact, a private limited liability that issues bonds must set up one of the following alternatives: (i) the establishment of a Board of Directors and Fiscal Council or Statutory Auditor; or (ii) the establishment of a Board of Directors consisting of at least one Audit Committee, and an external auditor.
The possibility for a Mozambican limited liability quota company to be able to use this type of financing is not new. The Law on Limited Liability Quota Companies (Lei das Sociedades por Quotas), approved by Law of 11 of April of 1901 provided, in its article 50, for the possibility of limited liability companies to issue bonds, establishing that “it shall be observed as applicable, in respect of the bonds issued by the companies subject to this law, the legal provisions related to bonds of the limited liability share companies [sociedades anónimas]".
With the entry into force of the, now revoked, Commercial Code approved by Decree-Law no. 2/2005 of December 27 – which revoked the Law on Limited Liability Quota Companies – a provision allowing limited liability quota companies to issue bonds ceased to exist, making the issuance of bonds an exclusive prerogative of the limited liability share companies (and of cooperatives, since 2009 with the entry into force of Law no. 23/2009 of September 8).
However, there is no justification for limited liability quota companies being prevented to finance themselves through issuance of bonds. Considering that the number of limited liability quota companies in Mozambique is currently quite significant, it is not only desirable, but important, to allow this type of company to issue bonds.
As a curiosity, in Portugal, when the Code of Commercial Companies (Código das Sociedades Comerciais) was adopted, the same happened: limited liability quota companies could no longer issue bonds, and it was necessary to expressly allow them to issue bonds, which was done through Decree no. 160/87 of April 3.